Funding the Future

Summary

A ~37-minute founder-facing episode from mid-2023, recorded for the Funding the Future series of Brett Stapper’s Category Visionaries (the Frontlines.io feed has since been renamed BUILDERS). The series flips the show’s usual format — instead of founders, it interviews the investors who back them — so Brett asks the questions a B2B founder would ask: how do you market a venture firm, what do you look for in a pitch, what goes wrong in go-to-market, how do you coach storytelling, and what should a founder do when “things are bad.” Recorded roughly a year into Kyle’s time at Contrary.

The origin story, compressed to its investing-relevant half. Videographer with too many jobs → farming them out to other creatives → “running a creator marketplace before that was cool” for four years, then a sale. The part he keeps is the resource for talented, passionate, creative people role, which is what pulled him into venture. Then what he calls his Goldilocks experience: TCV, Coatue, a couple of years as a partner at Index, and about a year at Contrary leading the later-stage side (he invests Series A and beyond; the firm goes pre-seed onward).

Why the writing stopped, and why it came back. Two details that appear nowhere else in the corpus. The hiatus was a compliance story: TCV and Coatue are crossover firms active in public markets, with “very scary compliance departments,” so he stopped writing and stopped engaging on social out of fear of saying something the firm wasn’t allowed to say. The return was a job search in public. At Index he was “a piece of a much bigger machine” and missed the entrepreneurial feeling of “putting my fingerprints on something,” so he started asking what a firm “built for the next 20 years rather than purpose-built for the last 20” would look like. The Unbundling of Venture Capital came out of that exploration — and “I not only got a bunch of great content for my writing, I also managed to convince myself that Contrary was the perfect fit.” (The written version of that conclusion is Contrary — My Renegade of Choice.)

The quake book. Poor Charlie’s Almanack, with the self-aware caveat that in the value-investing corner of FinTwit it’s a “roll your eyes kind of answer.” What he values is the breadth — “one of the best investors in the world… very rarely talks about investing and almost always talks about psychology” — and that it got him thinking about his own decision-making, which feeds his writing. He’d been digging into the Stripe Press edition released around that year’s Berkshire Hathaway meeting, which he calls “a very weirdly capitalist spiritual experience.” Podcast: Acquired — he met David Rosenthal years earlier when Rosenthal was at Madrona and Kyle was at Amazon in Seattle, and claims to be among the first hundred listeners, but only started listening seriously three months before this recording. His framing of why it’s good is a research statement: “research is really difficult to get right… every episode is just a magnum opus.”

Contrary Research, behind the scenes — the best operational account in the corpus. The ethos first: identify the sharpest people as early as possible and “build products for them that keep us relevant in their lives throughout their whole career” — job search out of school, leveling up, which startup to join, finding a co-founder — a set of product SKUs at different points in their life, aimed at a community of ~500. Research started as one of those SKUs: community members with two or three offers from private tech companies asking for the investor’s view (valuation, competitive landscape). It was done ad hoc, then productized, then open-sourced — “let’s get it out to the world and let people tell us where we’re wrong.” Cadence in mid-2023: ~20 company memos a month plus one category deep dive, nearly 200 memos to date. The most recent deep dive was The New Frontier in Finance, by Megan Kao with Kat Orekhova, CEO of Vareto, on AI across the finance stack.

Two mechanics worth keeping. The data engine: company profiles on the site without coverage are watched for click volume, and high demand decides what gets written next. And the answer to do you ever go negative: no buy/sell/hold, but every memo has a key opportunities / key risks section, and “my hypothesis is that for any VC, 50 to 60% of the diligence that you could do on a company, you could do outside-in. And so this is effectively just that diligence.”

Against content marketing: “articulating our vibes.” Asked whether research is the firm’s content-marketing strategy, Kyle says he isn’t a fan of content marketing — “ironic because I’m a writer.” The failure mode is hawking your own book: at best people write you off because you’ll only say nice things about your portfolio; at worst they stop trusting you because you’re inflating things. The alternative he describes is putting the firm’s frameworks and ways of thinking out there and seeing what they shake loose — “if our way of thinking resonates with you, let’s chat… and if not, that’s okay.” Research does that for the firm; his own writing does it for him as an individual; and Foundations & Frontiers, the then-new digital magazine written by Anna-Sofia Lesiv, does it for broad technology trends (batteries, satellites) rather than specific companies.

How venture marketing evolved. The three-iteration story from the Unbundling essay: monolithic firm brands where the individual investor barely mattered → fiefdoms inside big firms (a crypto practice, a robotics pod) → the unbundling into individual renegades (see The Renegades of Venture Capital). The cause is founders becoming more discerning consumers: brand halo is “still certainly a part of the equation. It’s no longer the only component.” And the reason so many VCs are suddenly loud is that “they’re realizing that they’re fairly undifferentiated.”

“What is the job to be done that you’re hiring this firm’s money for?” The framework he gives every founder who asks which investors to take money from (see Jobs to Be Done). The danger is firms trying to be everything to everyone — “broadly mediocre, or maybe broadly good and not the best at anything.” Contrary’s own answer: access to the young, hungry, ownership-seeking people it tracks — the firm is best for companies that prioritize hiring exceptional, entrepreneurial talent, i.e. talent vortexes — “that’s what our capital is for.” Kyle’s personal answer is a corpus of case studies: TCV, Coatue and Index all invest in different companies at different stages, so his value is “here’s the case study, here’s the person, here’s the company that you want to learn from.”

Pitches, red flags, go-to-market. 15–20 founders a month, but with the 2021 mania over he’s spending more time going deep with a few people before investing and “knocking down doors for them.” The single biggest separator: whether validation happened. “In their mind, what they’ve done to validate the idea is have the idea.” The founders he loves are “10 steps ahead of you.” GTM’s biggest obstacle is lack of focus — acquisition cost, churn and long-term value for a specific type of user — and the conversation he has with nearly every team is the choice between slogging through a slow sales cycle for large customers you can later move down-stack from, or sprinting through sticky mid-market customers and expanding.

Category creation is a marketing problem, not a technical one. Founders are better these days at separating actionable goals from long-term vision. The first move is almost never creating a category; it’s the Trojan horse / “gateway drug” — get in with a wedge, then own more of the workflow. When a founder genuinely has to educate the market, the conversation turns to community, education, content and “building this network of people that all have the same problem so they can educate each other.” His example is Replit: IDE → education → Ghostwriter, and the thesis that “exponentially more software is going to be created over the next 10, 20 years than has been created over the last 10, 20” — so the question shifts from how you let people write code to how much of the environment, lifecycle and habits you own, and Replit’s bet is that as coding gets simpler, people stop tolerating friction between a hodgepodge of tools.

Advice when “things are bad.” Two separate things suck: the macro (spend, customers) and the fundraising environment, where “VCs are scared of their own shadow.” They need different responses. For the first: people are still buying software; what changed is the scorecard, so “the playbooks of 2021 don’t work today” — be more customer-obsessed and make yourself a must-have. For the second, Controlling Your Own Destiny: know the math of your own model — milestones, cost to reach them, cash, runway — so “you don’t want to be at the mercy of a bunch of VCs that are scared of their shadow,” and build relationships with the investors who’ll be ready at that point. Then the framing that recurs across his 2023–24 appearances: a founder’s job boils down to storytelling to investors, customers and candidates — “that’s like the bulk of your job.”

Coaching storytelling. Two things: Made To Stick for the psychology of why ideas stick, and then practice — tell the story, ask how it landed, find where it didn’t resonate, fine-tune. The reframe: “a lot of people think that a story is something that either you have or you don’t have” — wishing for a sexy-enough AI angle — but “a story is just a thing that you’ve practiced or not practiced.”

What he’s looking for (mid-2023). AI across the finance stack, following the deep dive. And in AI infrastructure, a lesson from investing in Databricks and Snowflake: capabilities race ahead of the ability to orchestrate them, and there’s a long history of powerful data-science tools that are “borderline unusable” for that reason. So: model orchestration and selection (Hugging Face as the enabling example), and companies with a working funnel — open-source or free traction proving the top is open, plus conversion into an enterprise-grade product. The standing criticism: many AI companies have “very fleeting business models.”

The 12-month prediction, via Historical Futurism. How past people predicted the future — Back to the Future going forward to 2015 and betting on the fax machine, because fax was new in the 80s and looked permanent. So he anchors forecasts to Lindy things rather than hype: “the physical world is going to rage on.” AI, Vision Pro and AR/VR are interesting, but goods still move, supply chains still need managing, and deglobalization makes supply chains more complex, not less — a theme Will Robbins writes about. Managing the physical world will get “increasingly important and increasingly complex,” which is the opportunity.

Transcript

~37 minutes. Recorded for the Funding the Future series of Category Visionaries*, hosted by Brett Stapper of Frontlines.io, and published 23 August 2023. Transcribed locally from the episode audio; ASR errors and names cleaned, text paragraphed and speaker-attributed; nothing reordered or summarized. Corrections applied: Coatue, quake books, Poor Charlie’s Almanack, Megan Kao, Vareto, Ghostwriter, Anna-Sofia (Lesiv), “wedge.”*

Cold open

Brett Stapper: Welcome to Funding the Future, a special edition of Category Visionaries, where instead of interviewing founders, we interview the VCs and angel investors that back them with capital, resources, and advice. Now, let’s jump straight into today’s episode.

Hey, everyone, and thanks for listening. Today I’m speaking with Kyle Harrison, general partner at Contrary. Kyle, thanks for chatting with me today.

Kyle Harrison: Thanks for having me. I’m excited.

From videographer to venture

Brett Stapper: Yeah, no problem. So to kick things off, could we just start with a quick summary of who you are and really just a bit more about your background?

Kyle Harrison: Yeah, absolutely. So I’m Kyle Harrison, one of the general partners at Contrary. To give the quick background on me: I started as a founder in the early days. I didn’t even know to call it a startup. I was a videographer. I was doing jobs. I had too many jobs, so I started farming it out to other creatives. And before I knew it, I was running a creator marketplace before that was cool. So I ran that company for about four years, sold it, and was just really excited. The thing I loved most about my company was being able to be this resource for talented, passionate, creative people. And that introduced me into venture.

And so I kind of went through this — what I joke is my Goldilocks experience — of spending a few years at some very, very different firms, learned a ton. So I was at TCV and Coatue. Before, prior to Contrary, I was a partner at Index for a couple of years, and then I’ve been at Contrary for about a year leading our sort of later-stage efforts. So I invest anywhere from Series A and beyond, but Contrary, we’ll invest anywhere from pre-seed to later stages.

Where the writing came from

Brett Stapper: And something I didn’t mention in the intro there is you’re a very active writer, and I’ve read a lot of your essays and I’m a huge fan of your work. Where did that writing come from? What’s the backstory there? Have you always been a writer, or is that something you developed later on?

Kyle Harrison: Yeah, you know, it’s funny. So I used to write a lot. Like when I was running my company, I would write mostly to help me think through things. And then just by happenstance, a lot of the firms that I’ve worked at have been crossover firms. So both TCV and Coatue, they’re very active in the public markets, and as a function of that, they have very scary compliance departments. And so I stopped writing. I stopped really engaging in social because I was always just too afraid I was going to accidentally say something that we weren’t allowed to say. And so it kind of took a hiatus for a long time.

And then while I was at Index, I sort of got this itch. Index, Coatue, they’re great firms, but they’re very established firms. They’ve been around for 20-plus years. I was sort of a piece of a much bigger machine. And the thing that I was missing was the entrepreneurial feeling of putting my fingerprints on something. And so while I was at Index, I started to think about, all right, I really love investing, but I also want to feel like I’m building something unique. What would be the ultimate sort of combo? And the idea was, what if I joined a venture fund that’s younger and is doing something very differently?

So originally it just started almost as my job search, to some extent, where I was like, well, what are the things going on in venture? And what would I want to do? And what would I want in a firm that I was going to join that would be different for the next 20 years, rather than sort of purpose-built for the last 20 years? And as I started to do that exploration of how I thought about venture, that’s a lot of where my writing came from. So one of my first big pieces that popped was called The Unbundling of Venture Capital, where I talked a lot about the rising importance of the individual brand of each investor and how firms have sort of been diluted, and all these things. Those were aspects of me figuring out where I wanted to go to work. It just so happened that as I did this exploration, I not only got a bunch of great content for my writing, I also managed to convince myself that Contrary was the perfect fit for all the things that I was looking for.

The quake book: Poor Charlie’s Almanack

Brett Stapper: Wow. Super interesting. And one thing we always ask on the show when we’re interviewing founders is we ask them about quake books. And I always give a shout-out to Ryan Holiday — I stole that from him. And as I was looking through your website, I saw a reference to quake books, and sure enough, you linked Ryan Holiday there as well. So I’m going to put you on the spot here, probably the hardest question of the interview. If you could choose one book, or if you had to choose one quake book, what would that book be?

Kyle Harrison: Yeah, it’s such a hard question. I’ve got three kids and it’s like choosing a kid. It’s just so impossible. It’s actually kind of funny — in some corners of the internet this would be a cop-out, obvious answer, and in other corners it’s maybe a little bit more interesting. But if I think about the books that get me thinking most aggressively, as well as expose me to such a broad library of ideas, probably the one book that I keep coming back to year after year is called Poor Charlie’s Almanack. Which again, if you’re in the value-investor, equities corner of FinTwit on Twitter, that’s a roll-your-eyes kind of answer, because everybody just loves those kinds of books.

But Poor Charlie’s Almanack is one of my very favorite books because it’s basically just a collection of Charlie Munger’s best speeches and thoughts and mental models and frameworks. And the thing that I love most about it is just such variety, and it’s so addressable. And I love the concept that one of the best investors in the world very rarely talks about investing and almost always talks about psychology. So that got me so deeply thinking about my own personal decision-making, which also factors into a lot of my own writing. And now there’s this really cool — so for this past annual meeting for Berkshire Hathaway, Stripe Press produced this new edition of Poor Charlie’s Almanack. And it’s got a bunch of video interviews and graphics, and you can find it online, and it’s just awesome. So I’ve been digging into that for the last few months.

Brett Stapper: Were you at the conference this year?

Kyle Harrison: I wasn’t. Unfortunately, I couldn’t make it this year, but I’ve been a few times before. And it always feels like a very weirdly capitalist spiritual experience.

Brett Stapper: Yeah. I just went for the first time this year and it was a lot of fun. It was very different from a normal conference that you’d go to. I do a lot of work in cybersecurity, so I’m used to Black Hat or RSA or these types of events. And you’re just walking around the showroom there — there’s no cool swag being thrown out and given away. You’re buying everything. And it’s a very dry event, but I also learned a lot. And it was just very magical, for lack of a better way to describe it, to see those guys on stage that I’ve seen my entire life. It was just so cool to see them live.

Kyle Harrison: Yeah, exactly.

Podcasts: Acquired, and why research is hard

Brett Stapper: What about podcasts? Are there any specific podcasts that you really enjoy listening to, apart from Category Visionaries, of course?

Kyle Harrison: Of course. I have a ton of respect for the guys at Acquired. So I met David Rosenthal quite a while ago when he was still at Madrona in Seattle. I was working at Amazon in Seattle, and so I met him briefly there. Really — this is the hipster in me — but I was probably one of the first hundred people to listen to that podcast when it very first came out, because it kind of made the rounds first in the Seattle tech crowd and then made its way elsewhere. But I have a huge amount of respect for what those guys do.

And we can talk a little bit about this, but over the last year I’ve launched Contrary Research, where as part of Contrary we’ve produced almost 200 memos on different private tech companies, giving the overview of how to understand them and their market. And research is really difficult to get right. It’s really easy to get wrong, but it’s super difficult to get right. And the guys at Acquired just crush it. Every episode is just a magnum opus of the overview of the topic that they’re covering.

Brett Stapper: I just got turned on to them about three months ago and I just geek out over it. I do a lot of running, so that’s all I’ve listened to ever since I first heard it. That’s all I listen to now when I run, when I walk the dog. There’s just so much content. I think they’re 200-something episodes in and each episode is three hours. So it’s going to take me probably a year or more to get all the way caught up, but I’m riding with that podcast. It’s so good.

Contrary Research, behind the scenes

Brett Stapper: Yeah. Let’s talk a little bit about research. So what does that look like just behind the scenes? Maybe if you want to talk about a recent research project, we can start there.

Kyle Harrison: Yeah, totally. So the way that Contrary works fundamentally is that we have this core ethos of: if we can identify the sharpest people in the world as early as possible in their career, and then build products for them that keep us relevant in their lives throughout their whole career, we have this unfair advantage in investing in the next generation of great companies. And so where that started was years ago — we’d go out and we’d find the best, just the sharpest young people we can find in undergrad, grad school, PhDs, research institutes, whatever. Then we expanded to top companies, finding the best engineers and product folks and what have you. And we’ve now built this kind of core community of about 500 folks. And we stay really close to them.

And we’re constantly asking ourselves: as a really sharp person in tech progresses through their career, what are the experiences they have, and how could we be relevant even years before they start a company? And so that looks like, when they get out of school, it’s helping them find their first job. When they want to level up in their career, it’s helping them with that. When they want to go work for a startup, it’s helping them understand which startups are interesting to join. Once they do want to start a company, it’s helping them find a co-founder, giving them resources, whatever it might be. So we’re constantly trying to think about these product SKUs at different points in their life.

And one of the things that came up a ton was this idea that — again, the people in our community, we’ve kept a very high bar, so they’re very sharp. They don’t necessarily need our help getting jobs. A lot of times it’s just that they appreciate having a trusted sounding board as they’re evaluating the opportunities that are out there and what’s going to be best for their career. And so the way that we approached this is we’d have people come to us and they’d say, hey, I have these job offers to these two or three private tech companies. They’re in very different industries. I like the people, but what’s the investor’s perspective on these companies? Is the valuation too high? Is the competitive landscape too complicated?

And so we would end up doing this ad hoc, and we realized, let’s just productize this and share it with the entire community. And then rather than keeping it under lock and key for a select group of folks, we realized that, hey, we can only go so deep on so many companies. Let’s open-source it. Let’s get it out to the world and let people tell us where we’re wrong. And so now we have a pretty robust editorial process internally where we put out about 20 memos on different tech companies per month, and then about one deep dive per month into a category.

And so we’ve done everything from Hugging Face to Stripe to OpenAI to Canva to a bunch of different companies. And then we’ve done deep dives into things like design software more broadly, talking about Figma and Canva. We’ve gone into cloud security. So most recently, we produced a deep dive — a colleague of mine, Megan Kao, and then the CEO of a company called Vareto put together this deep dive on, we called it The New Frontier in Finance. Basically this idea of: AI is impacting every industry. Finance is literally just a universe of structured and unstructured data. What are the implications of AI in finance? And so they went super deep in the category, everywhere from financial planning to reporting and bookkeeping and things like that. And so that deep dive was informed by having done several memos on different private companies. So it’s just been an awesome way to get to talk about a bunch of different interesting things.

Do you ever take a negative stance?

Brett Stapper: And when you’re doing your research on these private companies like this, do you ever take a negative stance against them? So if you’re doing your research and you uncover something negative, is that the slant ever? Is it almost like how some of the short sellers publish research? Is it ever like that? Or is it always more in a positive light or a neutral light?

Kyle Harrison: Yeah. So we don’t take a stance on the companies per se, right? We don’t have a buy, sell, hold rating. However, we try and take this approach of: we are constantly paying attention to what people are interested in. For example, we have a bunch of company profiles on our site that don’t have coverage. And we pay attention to, hey, who’s clicking onto their page and wanting to see a memo? And when we see high volume, we say, all right, let’s write a memo about this or that company. So we try and have this fairly robust data engine that tells us what are the companies that people are interested in. And then we use that to inform the companies that we cover.

But a lot of times as we’re doing that research, we come across things that are negative, right? Whether it’s negative press or lawsuits or founder breakups or whatever it might be. And the approach that we’ve taken is just to be very deliberate and pragmatic, where it’s like, hey, we’re just summarizing what’s out there. My hypothesis is that for any VC, 50 to 60% of the diligence that you could do on a company, you could do outside-in. And so this is effectively just that diligence. And we specifically have a key opportunities and key risks section in every memo. And the key risks are often where those things show up. And so if we find some negative things, a lot of times the risk will basically be, hey, if these issues become exacerbated, that’s going to pose a real potential threat to the company.

Content marketing versus “articulating our vibes”

Brett Stapper: And then is that the primary content marketing strategy for the firm? Is that what really drives content marketing?

Kyle Harrison: Yeah. So I’m not a fan of content marketing, which is ironic because I’m a writer and I’m producing content and doing all these things. I think that when I think about the spectrum of content that exists on the internet, a lot of people have built this engine around what I might affectionately refer to as hawking their own book, right? And I think that creates a lot of messy incentives, where at the very least people just write you off because they know that you’re just going to say nice things about the companies you invested in. And at the very worst, they’re going to stop trusting you because you’re effectively inflating things that maybe shouldn’t be inflated in the first place.

And so we shy away a lot from traditional content marketing. The way I think about it instead is that we as a firm are trying to articulate our vibes on the internet. And so we’re trying to put our message out there to say, hey, here are the things that we’re thinking about. Here are the frameworks that we use. And so Contrary Research is one way to do that. My writing is a way to do that for me as an individual investor. Contrary Research helps folks think about that.

We also have a series — so we just launched this digital magazine that I’m absolutely in love with called Foundations & Frontiers. It’s written by a woman named Anna-Sofia who works with us as a writer. And it’s different structurally. Where Contrary Research is going deep into the details on very specific companies, she’s unpacking broad technology trends. So she has a piece on batteries. She has a piece on satellites. She has all these different things. And it’s just an opportunity for us to say, listen, we are deeply thinking about these categories and trying to understand the underlying trends and dynamics that are at work here. If our way of thinking resonates with you, let’s chat, let’s find something to jam on together. And if not, that’s okay. But that’s us trying to put our vibes out into the universe and see what that shakes loose.

How marketing in venture has evolved

Brett Stapper: And if I have the dates right, you first got started in venture in 2016. So if that’s the right date — or you can adjust for whatever the right date is — how have you seen marketing evolve for venture capital firms? Because I feel like five or six years ago, there wasn’t really that much out there. Today, it seems like every VC is very aggressively marketing or talking about marketing. Is that accurate, how I view things, or am I wrong there?

Kyle Harrison: That’s accurate. I mean, venture is a really interesting industry. Like I mentioned a little bit, one of my first pieces that really popped off was this article that I wrote called The Unbundling of Venture. And I basically talked about these three iterations of venture firms, where originally you had these very monolithic brands, where it was almost to the point where it wasn’t even about the person, the individual investor within the firm — it was the firm itself. And then increasingly, you started to see these fiefdoms emerge, right? Where you have really big firms, but they have individual components within them. And so you might have a specific crypto practice or a specific team that’s focused on robotics or AI/ML or whatever it might be — these kind of pods. And so you started to see these fiefdoms emerge.

And what I referred to in the piece was this unbundling that’s happened in venture, where effectively what you have are a lot of individual — I call them renegades in venture capital — where they’re basically changing the game and changing the messaging. And I think the reason that has changed is that people, as consumers of the internet, have become a lot more discerning in how they pick an investor. So it’s not just — even though it’s still very important to say, hey, this is a brand that I want to be associated with; brand halo is still certainly a part of the equation — it’s no longer the only component in the equation. People are also starting to try and think and understand — again, I go back to this silly word, but this idea of vibes — what are the vibes that this individual partner puts out? And what is it like to work with them? And what value do they bring? And what’s their product?

And I think that what VCs are finding, and the reason that so many of them are getting so loud about their marketing, is they’re realizing that they’re fairly undifferentiated. And the framework that I use to articulate how venture firms are eventually going to realize they have to differentiate is that they have to have a very specific value proposition. And so every founder, when they ask me how I think about which firms I should work with or who I should take money from, I always come back to this framework of asking: what is the job to be done that you’re hiring this firm’s money for? And there are certain firms that are really good, depending on what the job is to be done, or whatever it might be. But the danger is these firms that are trying to be everything for everyone, because eventually, if you get so diluted and so broad, it’s very difficult to be good at any one particular thing. And so you just become broadly mediocre, or maybe broadly good and not the best at anything per se.

The job to be done: Contrary’s, and Kyle’s

Brett Stapper: What’s the job to be done for Contrary, and for you, for Kyle?

Kyle Harrison: Yeah. So the focus for Contrary is very much — again, it goes back to this ethos of very people-centric. And so we focus a lot on talent vortexes. So companies that have a really high priority for hiring exceptional people, and in many cases who want to be entrepreneurs themselves. Which is funny — in many companies, they don’t necessarily want that, right? Because they don’t want their people to leave after two or three or four years to go start their own companies. And that’s totally fine. And that’s a strategy. And there are a lot of companies like that, where people will stay for a really long time and never go anywhere else. But we have found that the most exceptional companies often are made up of very entrepreneurial people.

So if you’re a company that wants to hire a lot of younger — we do have folks that are in their 30s, early 30s to 40s; we don’t have a ton of C-suite exec, gray-haired talent that’s been around for a long, long time — but if you want these young, hungry, scrappy people that want to take ownership of something, then Contrary has arguably one of the best pulses on where those exceptional people are. And so if you want access to those folks, we’re a great firm to hire. And that’s what our capital is for.

For me as an individual investor, I had this experience of — again, I’ve now spent seven, eight years in investing, ran a company before that. And I think a lot of what I have built for myself is this corpus of data of seeing a lot of different companies at a lot of different stages and a lot of different backgrounds. TCV, Coatue, Index — they all invest in fairly different types of companies at different stages. And so I’ve been exposed to a lot of very different playbooks. And so often I find the value coming from: hey, if you’re trying to solve any problem, I’m not always going to be the person who is like, I’m the one person in the world that’s built this thing. And sometimes there are VCs like that and they’re great, and sometimes there’s not. But for me, it’s my ability to point to, here’s the case study, here’s the person, here’s the company that you want to learn from, because I’ve seen what you’re going through in these different instances.

Brett Stapper: [Mid-roll] This show is brought to you by Frontlines Media, a podcast production studio that helps B2B founders launch, manage, and grow their own podcast. Now, if you’re a founder, you may be thinking, I don’t have time to host a podcast — I’ve got a company to build. Well, that’s exactly what we built our service to do. You show up and host, and we handle literally everything else. To set up a call to discuss launching your own podcast, visit frontlines.io/podcast. Now, back to today’s episode.

Pitches per month, and going deep before investing

Brett Stapper: If you had to put a number to it, how many pitches do you see per month?

Kyle Harrison: I would say, Contrary right now — and again, markets are where they are and stuff — but I’m easily talking to 15 to 20 different founders every month. Ebbs and flows, depending on conferences or whatever it might be. But I think more so what I’m spending my time thinking about is: I certainly take pitches. I certainly meet with founders that I’ve never met before and try to get to understand them and things like that. But I’m starting to get to this point where I’m more interested in finding these folks that I’m really excited about working with, and then spending a good chunk of my time just going deep with them and spending a bunch of time with them, even before we invest in many instances. I think that has been a really rewarding part of the job over the last few months, as the markets have been in a different place. Now it’s not as crazy. It’s not as manic. It’s not every company and their mother getting preempted every other day, but rather it’s finding the folks that we really resonate with and then doing the things that we can do to knock down doors for them.

Red flags in pitches

Brett Stapper: And in the pitches that you see, often are there any red flags or common patterns or common mistakes that you see founders make that just drive you crazy, and you wish they didn’t do?

Kyle Harrison: I think the number one thing I notice that sets apart the very best pitches and conversations that I have from the run of the mill: building a company is a very manic, obsessive activity. And there are a lot of instances where I think that today especially — maybe this is different in the late 90s and early 2000s and stuff — but especially today, the playbooks are fairly established. The frameworks for how to think about an early idea and to validate with customers and do all these things, those are fairly well-trafficked concepts. And so when I meet somebody where it’s like, hey, what have you done to validate the idea? And it’s very obvious that, in their mind, what they’ve done to validate the idea is have the idea. And now they want to raise money to go validate the idea further. And it’s like, there’s so much that you can do to talk to customers and understand their needs and play around with the alternatives or prototypes or what have you. And the founders whose conversation I enjoy the most are the folks where I say, hey, what have you done to validate this idea? And they’re like, hey, I’m 10 steps ahead of you. Let me lay out the things that I’ve thought about and tried and played around with and all this stuff. And those are the obsessives that I love working with.

Go-to-market mistakes

Brett Stapper: And in terms of go-to-market, are there any common mistakes that you see founders make?

Kyle Harrison: I think the biggest obstacle for an effective go-to-market engine is a real lack of focus. I think that people get in and they don’t spend very much time thinking about: what does the acquisition engine look like for a specific type of user? How expensive is that? How likely are they to churn away? And then over time, how valuable is that customer? And I have this conversation with almost every founder that I work with, which is this idea of: you have to ultimately narrow your go-to-market down to priorities. Could you sell to a lot of different people in a lot of different end markets with a lot of different use cases? For sure. But you have to narrow down to figure out where it makes the most sense, both from a unit-economic perspective as well as a long-term vision. Where do you want your company to be? And is it more important that you slog your way through a slow sales cycle to go get these large customers, because based on what your product is, that’s the easiest way to then move down the stack and soak up other use cases? Or does it make sense for you to just sprint and soak up all these small mid-market customers, because they’re valuable and they’ll stick around, and then you can start to expand? I have that conversation with almost every team I work with.

Category creation

Brett Stapper: What about category creation? Are you having those conversations often with founders?

Kyle Harrison: I think that founders are more often these days, especially, really prioritizing and understanding the difference between: what are my actionable goals and things that I need to do, versus what is the long-term vision that I have. And I think that for a lot of folks, I find myself using the term Trojan horse all the time, right? Or the maybe less PC way to say it is the gateway drug. What is the thing that you do first, to do super well? That is an area of a lot of focus. Very rarely is that creating a category per se. It is more so getting in with a wedge and then being able to expand and own more of a specific workflow or user base.

The category conversations that I have with folks that legitimately have to educate their users — I think that it has to come from a place of intense user love. And so I end up talking to those people a lot about things like community and education and content, and building this network of people that all have the same problem so they can educate each other. Category creation often does not necessarily center around a technical problem. It very much centers around, effectively, a marketing problem and a storytelling problem.

Replit as a category creator

Brett Stapper: Are there any portfolio companies that you’ve invested in that have created a category?

Kyle Harrison: Yeah, that’s a good question. I mean, I think that a lot of the companies that I have worked with have been not necessarily creating a new category, but very much taking advantage of existing established things. One company that I would talk about that I think has done a really good job of this is Replit. So we’re investors in Replit, and they started very much as just an IDE, a developer environment, to make it as easy as possible to start coding. They expanded to education, and then last year launched an AI copilot assistant called Ghostwriter.

And the reason that I would point to Replit as effectively creating a category — which is sort of on the nose, because it’s very much well-trafficked territory, right? This is a developer tool. People have been coding for a really long time. They have environments and ecosystems set up. I think that what Replit has stumbled onto, and is doing a really good job of taking advantage of, is this idea that exponentially more software is going to be created over the next 10, 20 years than has been created over the last 10, 20 years. This democratization, especially with generative AI, this quote-unquote democratization of coding capability, is just going to explode.

And so ultimately, it becomes less a function of how are you letting people write code, and how are you owning as much of the environment and lifecycle and habits of the people producing the code? And how do you give them all the tools that they need, rather than forcing them to use a hodgepodge of different tools? Replit is very much focused on: we want everything you could possibly need in one place, because this is going to be an increasingly simple process. And if it’s going to be an increasingly simple process, then increasingly you’re no longer going to put up with friction. And so Replit’s platform is very much focused on reducing that friction. And that’s not something, historically, the DevOps lifecycle has been — again, it’s been this hodgepodge of different tools, and people have focused on providing a very specific tool. Replit is very much focused on creating a full environment.

Advice when “things are bad”

Brett Stapper: Super fascinating. I was with a founder last night at dinner, and just talking about how things were going. And he told me, things are bad, and if any founder tells you otherwise, they’re bullshit. It’s just a scale of how bad things are right now. I don’t know if that’s the case with all of the founders that you work with, but that’s what I’ve heard from a lot of founders. So given that state of the market today, what are your conversations like with early-stage founders? And what are you advising them to do, given the current market today?

Kyle Harrison: So I think that there’s two things that suck right now. I mean, a bunch of stuff sucks. But there’s two things that really suck right now for early-stage founders. Number one, there is the broader macro environment, and that’s impacting spend and customers and all these different components. Then there’s the fundraising environment, which is certainly a subset of the macroeconomic environment. But there’s an element of VCs who are scared of their own shadow. And so it makes it more difficult to access capital and to do all these different things. And I think that you have to address both of those things in very different ways.

The first one is very much a customer-centric exercise. And so being able to understand and identify what customers are going through, and how you’re solving problems for them, is more important than ever. And it sounds super obvious and overstated. But the reality is that people are still spending money on things. They are still trying new software. They are still bringing on new tools. That hasn’t disappeared. What has changed is the scorecard that people are using to make decisions. And so if you try and address a very new set of problems and pain points with a very old playbook — very old feels, I guess; this is a stupid way to say it because it’s like a year old or whatever — but the playbooks of 2021 don’t work today. And so you need to really evaluate what problem you’re solving for your customer and how you are an absolutely-must-have thing. That’s thing number one. And so I’m just continuing to push founders to be more customer-obsessed.

On the fundraising side, I actually think — I wrote this piece about controlling your own destiny a few months ago, and in it, I talked a lot about how you really need to understand the math of your own model. When you look at, what milestones do I want to get to? How expensive is it going to be to get me there? How much cash do I have? How much life and runway does that give me? You really need to nail that equation, because you don’t want to be at the mercy of a bunch of VCs that are scared of their shadow. And so the more control and understanding you have of your own model, to say, hey, here are the milestones I want to get to, here’s how expensive it’s going to be — and then I need to build relationships with the right investors who are going to be ready for me at that point, and stuff like that.

That is a really not-fun exercise for founders, because they don’t want to have to be thinking about it. But at the end of the day, when you start to boil down the real fundamental responsibilities of a founder, ultimately it comes back to the catch-all of storytelling. But it’s basically: you are storytelling to investors, you are storytelling to customers, and you are storytelling to candidates. And that’s the bulk of your job. And so it’s understandable that raising money makes you feel like you’re taking time away from the business, but you do want to be very cautious and thoughtful about articulating your story in a meaningful way that plays in this market and makes sense to people in this market.

Coaching storytelling

Brett Stapper: And if you were having a conversation with an early-stage founder, and you see that they have an interesting product or an interesting idea, but they suck at storytelling — or they’re not good at storytelling — what do you advise them to do? How do you coach them to become a good storyteller? How do you build that skill or nurture that skill?

Kyle Harrison: Yeah. Actually, the biggest thing is, I guess, two things. So number one, I’m a big fan of a book called Made To Stick, which is kind of an older book, but spends a lot of time thinking about the psychology of storytelling and thinking about how to make these ideas stick in people’s heads. So I certainly recommend that quite a bit. But then the second thing is, it’s just practice. It’s really just practice, and then asking questions. Telling a story and then asking questions of how that resonated with people, and getting their feedback and reactions. And when you identify ways in which people are not resonating with your story, then fine-tuning your story and honing in on what does and doesn’t resonate with people.

I think that’s the thing — a lot of people think that a story is something that either you have or you don’t have. It’s like, man, I wish I had an AI angle that was sexy enough to catch everybody’s attention. And it’s like, for sure, there are things that are going to tap the hype-word buzz. But at the end of the day, a story is just a thing that you’ve practiced or not practiced, and you can develop or not, to frame it in a way that resonates with people.

Brett Stapper: Yeah. Amazing. I love that. Super, super useful advice.

What he’s looking for: the finance stack and the AI orchestration layer

Brett Stapper: Now, last couple of questions for you, Kyle. What opportunities are you looking for right now? Are there any specific categories or markets that you’re especially excited about?

Kyle Harrison: Yeah, so a couple of categories that I’m really, really bullish on. So number one — again, we wrote this deep dive on finance tools. I think that there’s a real opportunity in terms of the old-school way of leveraging things like financial planning and stuff like that. I think AI certainly presents a really interesting opportunity there. So we’ll be spending a fair bit of time thinking about different tools that are addressing different aspects of the finance stack. That’s certainly one.

And then another area that I’m really interested in. So again, in my career, I’ve spent a lot of time investing in data infrastructure, investing in companies like Databricks and Snowflake. And one of the things that I’ve seen the most at the infrastructure level is that robust features and data collection and all these meat-and-potatoes aspects of building technology — they’re fundamental. They’re critical. It’s super important. But one of the things that people often lose sight of is that the capabilities of some of these tools race far ahead of the ability to effectively orchestrate and leverage the tools. So there’s a ton of history of different data science tools that are really powerful and borderline unusable, because they’re very difficult to orchestrate.

And so now, in this world of LLMs and trying to think about how folks are leveraging different models, I’ve become really interested in, number one, tools that enable that orchestration of different models, selecting models. And so I’m a huge fan of companies like Hugging Face that have enabled access to these different things. That’s a big piece of it. The second piece of it is I’m constantly looking for companies that can build this really effective funnel in AI, where — yeah, you want to see this huge traction of initial users, or open-source traction or whatever; it kind of proves that the open funnel is open and attractive — but you also want to see some kind of conversion into an enterprise-grade tool that that company can then turn around and sell.

And the best tools, the best business models — this is a constant criticism of companies that are selling AI products right now — is that many of them have very fleeting business models. Like, how are you actually going to make money charging for this thing? And I’m really focused on companies that have built tools that enable people to leverage this technology. One of our portfolio companies is a data visualization tool for fine-tuning models. And again, going back to this orchestration layer — looking for tools that are actually monetizable, because they unlock the superpowers that AI can provide to users.

Twelve-month predictions: historical futurism and the physical world

Brett Stapper: And final question here before we wrap. Let’s zoom out to the next, let’s say, 12 months. What are your predictions? What’s going to happen in tech and the world of venture in the next 12 months?

Kyle Harrison: Oh man, that is a tall order when things are changing on a dime. There is this topic that I always want to explore more and more of, and I never have enough time to go deep on it, but I love the concept. I refer to it as historical futurism. And it’s this idea of looking back at the past and how people have predicted the future. And so the example I always point to is things like in Back to the Future, where they go forward in time — what do they predict? And one of their predictions — I mean, they get a bunch of things; there’s a bunch of things that we missed out on. We’ve already passed — it was 2015 or whatever. But they really focused on the fax machine, and they thought the fax machine was going to be just absolutely critical. And that’s because in the 80s, fax machines were new. And so people thought, this is going to be a thing that sticks around. And they totally missed the mark on that.

So whenever I try and forecast and extrapolate, I feel like I’m trying to anchor to things that are not hypey and buzzy, but the Lindy principle of things that have been around — what’s going to continue to be true. And so for me — maybe this is a little bit contrarian, which is appropriate based on my firm’s name — I think that one of the things I spend a lot of time thinking about is that the physical world is going to rage on. As much as we get excited about what AI is capable of, or even now with Vision Pro and thinking about AR, VR — all of those things are super interesting, but the world still needs to move. Goods still need to be transported. Supply chains still need to be managed. Physical, natural goods and resources still need to be accessed. And I think that there is a huge opportunity to increase the efficiency, especially in a world where deglobalization is certainly happening and upon us. Supply chains are only going to get that much more complex.

And so one of my partners, Will Robbins, he talks about this all the time, and I think he’s written about it a few times. But this idea that we’re still looking for things that make the physical world more efficient. And so when I think about, hey, what am I most excited about and what do I think is going to happen over the next even 12 months — I think that managing the physical world is just going to continue to be increasingly important and increasingly complex, which creates an awesome opportunity for people to leverage technology.

Close

Brett Stapper: I love it. Kyle, we’re up on time, so we’re going to have to wrap here. Before we do, if any founders want to get in touch with you, where’s the best place to go?

Kyle Harrison: Yeah, so much to my wife’s chagrin, I spend way too much time on Twitter. So Twitter is definitely the best place to find me — it’s just @kwharrison13 on Twitter, and my DMs are open, and I’m always excited to jam.

Brett Stapper: Amazing. Kyle, thank you so much for taking the time to come on. I really enjoyed this conversation, and I know the founders listening are going to really enjoy it as well. So thank you so much for taking the time. I really appreciate it.

Kyle Harrison: Yeah, thanks for having me.

Brett Stapper: All right, keep it dense. This episode of Category Visionaries is brought to you by Frontlines Media, Silicon Valley’s leading podcast production studio. If you’re a B2B founder looking for help launching and growing your own podcast, visit frontlines.io/podcast. And for the latest episode, search for Category Visionaries on your podcast platform of choice. Thanks for listening, and we’ll catch you on the next episode.

Connections

The show

Brett Stapper — founder of Frontlines.io / Front Lines Media, host of Category Visionaries. The Funding the Future series is the investor-side edition of a founder GTM show, which is why the questions are unusually practical (pitch red flags, GTM focus, storytelling coaching).

Career and the writing

TCV · Coatue · Index Ventures — the “Goldilocks” tour. The compliance-department explanation for the writing hiatus (crossover firms, public-markets exposure) is stated here and nowhere else in the corpus.
The Unbundling of Venture Capital — the piece that “popped,” described here as a job search in public: the exploration that convinced Kyle Contrary was the fit. Its three iterations (monolithic brands → fiefdoms → renegades) are the spine of his answer on venture marketing.
Contrary — My Renegade of Choice · The Renegades of Venture Capital — the written conclusions of that search.

Contrary, mechanically

Contrary · Contrary Talent — the ethos stated as a product roadmap: SKUs for each stage of a sharp person’s career, so the firm is relevant years before a company exists. Community of ~500 in mid-2023.
Talent Vortex — Contrary’s job-to-be-done: access to young, hungry, ownership-seeking people, for companies that prioritize hiring them. “That’s what our capital is for.”
Contrary Research — the fullest behind-the-scenes account: born from community members asking for the investor’s view on job offers → productized → open-sourced. ~20 memos and one deep dive a month; the click-volume data engine; key risks as the home for negative findings; and the 50–60% of diligence is outside-in hypothesis.
Megan Kao · Kat Orekhova · Vareto — co-authors of The New Frontier in Finance, the deep dive that seeds his “AI across the finance stack” interest later in the episode.
Foundations & Frontiers · Anna-Sofia Lesiv — the then-just-launched magazine: broad technology trends (batteries, satellites) rather than companies.
Will Robbins — credited with the physical-world / supply-chain thesis Kyle borrows for his 12-month prediction.

Frameworks

Content Marketing — the case against it: hawking your own book costs you attention at best and trust at worst. The alternative, “articulating our vibes,” is the firm-level version of Storytelling.
Jobs to Be Done — “what is the job to be done that you’re hiring this firm’s money for?” — the framework he gives founders picking investors, and the reason everything-for-everyone firms become broadly mediocre.
Category Creation — a marketing and storytelling problem, not a technical one; the first move is a Trojan horse / wedge, and true education-of-the-market has to come from intense user love, expressed as community, content and peer education.
Storytelling · The Storytelling of Investing · Made To Stick — the founder’s job as storytelling to investors, customers and candidates; storytelling as a practiced skill rather than a possessed one.
Controlling Your Own Destiny — know the math of your own model so you’re not at the mercy of “VCs that are scared of their own shadow.”
Historical Futurism · Historical Futurism (Essay) · Back To The Future — the fax machine in Back to the Future as the canonical example of extrapolating from what’s new rather than what’s Lindy. The essay had shipped four weeks before this aired; the fax example is not in it.
Deglobalization · Supply Chain — why “the physical world is going to rage on” is the prediction.

Books and podcasts

Poor Charlie’s Almanack · Charlie Munger · Stripe Press · Berkshire Hathaway — the quake book, with the self-aware FinTwit caveat; the Stripe Press edition timed to the annual meeting.
Ryan Holiday — source of the quake-book question, on both the show and Kyle’s site.
Acquired · David Rosenthal · Madrona · Amazon — an early listener’s story, and the standard Kyle holds research to: “every episode is just a magnum opus.”

Companies

Replit — the category-creation example: IDE → education → Ghostwriter, and the bet that owning the environment matters more as software creation explodes.
Databricks · Snowflake — the data-infrastructure lesson behind his AI thesis: capabilities outrun orchestration.
Hugging Face — the enabling example for model orchestration and selection, and the open-funnel-to-enterprise conversion he wants to see.
Stripe · OpenAI · Canva · Figma — named Contrary Research coverage.